Sugar Prices Experience Slight Upturn Amid Mixed Market Signals
Market Overview
March NY world sugar #11 (SBH25) today is up +0.04 (+0.18%), and December London ICE white sugar #5 (SWZ24) is up +1.40 (+0.25%).
Market Dynamics
Sugar prices rebounded slightly today after early losses. This recovery came as the dollar index (DXY00) fell to a two-week low, prompting some traders to cover short positions in sugar futures.
Recent Pressures on Sugar
The sugar market has faced recent challenges, with NY sugar reaching a two-week low on Monday and London sugar hitting a month-and-a-half low today. Forecasts of rain in Brazil’s Center-South, the country’s main sugar-producing area, eased worries about drought conditions. Climatempo announced ongoing rainfall expected in this region over the next few days.
Traders and Fund Positions
Trader behavior adds to concerns; an influx of long positions by funds in London sugar could lead to liquidation and potential price declines. The latest Commitment of Traders (COT) report showed that funds increased their net-long positions by 453 contracts to 42,804, a record high since such data tracking began in 2011.
Concerns from Brazil’s Sugar Output
On October 25, Unica reported an 8% year-over-year increase in Brazil’s Center-South sugar production, amounting to 2.443 million metric tons in the first half of October. Cumulative production for the 2024/25 cycle also rose by 1.9% to 35.591 million metric tons. Additional bearish factors include heightened requests from India’s sugar mills for government permission to export 2 million metric tons of surplus sugar.
Impact of Fires and Drought in Brazil
Brazil has suffered from drought and severe heat, leading to fires that have devastated sugar crops, particularly in São Paulo, the nation’s leading sugar-producing state. Industry group Orplana reported that around 2,000 separate fires impacted up to 80,000 hectares of sugarcane. Analysts believe as much as 5 million metric tons of sugarcane may have been lost. Brazil’s government agency, Conab, reduced its production forecast for the 2024/25 season to 42 million metric tons, down from 42.7 million metric tons, citing lower yields due to adverse weather. Likewise, Rabobank and Datagro have lowered their projections for Brazilian sugar production.
India’s Monsoon and Production Outlook
On a different note, optimism regarding India’s monsoon rains suggests a bountiful sugar crop ahead. The Indian Meteorological Department reported rainfall of 934.8 mm during the current monsoon season, exceeding the historical average by 7.6%. This season runs from June to September.
Government Policies Affecting Sugar Exports
India’s Food Ministry recently lifted restrictions on local mills producing ethanol, which may extend curbs on sugar exports. Since October 2023, India has maintained limited sugar exports to ensure domestic supplies. In the previous season, only 6.1 million metric tons were exported, a significant drop from the record 11.1 million metric tons in the season before.
Production Trends in Thailand
Meanwhile, Thailand projects a significant increase in sugar production for 2024/25. The Office of the Cane and Sugar Board expects production to rise by 18% year-over-year to 10.35 million metric tons, following 8.77 million metric tons produced in the 2023/24 season.
Global Sugar Supply Forecasts
On a global scale, the International Sugar Organization (ISO) has forecasted a sugar deficit of 3.58 million metric tons for the 2024/25 season, larger than the previous year’s estimated shortfall. The USDA anticipates overall global sugar production will increase, reaching a new record of 186.024 million metric tons, with increased consumption pushing stocks to a 13-year low of 38.339 million metric tons.
More Sugar News from Barchart
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
